Economics and politics inseparable

By Chi Chun-chieh 紀駿傑

One of the main reasons the controversy over the service trade pact and the students’ robust response to it remain intractable is that the government and those opposed to the pact are approaching the issue from differing perspectives. While the government views the issue purely in terms of economics, opponents emphasize the importance of recognizing a political dimension. The two sides have very different ideas, and never the twain shall meet.

The government’s contention is that the signing of the cross-strait pact will enable Taiwan’s service sector to be more competitive internationally. Opponents to the pact say it will tie the nation and its economic future more closely to China and have significant political ramifications, such as creeping political change through increased economic engagement.

The government claims China has made generous concessions. Opponents say China’s “generosity” is, in itself, disconcerting, and are suspicious that Beijing is offering a poisoned chalice.

The government holds that the agreement will have a positive effect on the development of the nation’s service sector as a whole. Opponents emphasize the need to consider the potential negative effects it will have on individual industries and businesses.

The government warns that Taiwan risks being marginalized if the pact is not signed. The opponents counter that if it is ratified, Taiwan’s international status will increasingly be relegated to that of an outpost of China.

The differences in the above arguments can succinctly be categorized as “economics” versus the “political economy.”

The former says that signing agreements with China is an economic issue and consequently needs evaluation only from an that perspective. The latter argues that there is no way signing such an agreement with a country that has more than 1,000 missiles pointed at the nation’s shores can possibly be regarded as purely economic.

Rather, it is a political economic issue that needs to be handled with extreme caution.

Neoliberal economics, the prevailing economic theory, derives from the liberal economics of Adam Smith. International free-trade is implicit in the theory. This paradigm keeps economics and politics in their respective corners, to the extent of favoring complete withdrawal of government oversight and removal of any obstacles to trade.

“Liberal economics” is little more than an ideology of the privileged class in the modern capitalist system, because truly fair competition and a perfect market cannot exist. Further, the notion that either politics or the economic preferences of governments can be divorced from economics is simply an attempt to remove the dog-eat-dog element of reality to concentrate on purely economic thought.

Former Control Yuan president Wang Tso-jung (王作榮) once criticized Taiwanese economists fond of repeating the “market deregulation and free competition” mantra of parroting each other.

The political economy argument says that economic phenomena and events cannot be seen in isolation from the sociopolitical context in which they occur. In fact, economics was not considered a separate academic discipline in the West until the middle of the 19th century: Prior to that, the study of the economic behavior of states was known as political economy. Only by the Herculean efforts of neoclassical economists did economics become a field of study in its own right. The title of Karl Marx’s Das Kapital was appended with the clarification “A Critique of Political Economy,” and was aimed primarily at neoclassical economists of the day.